A Debt Agreement is a legally binding arrangement between you and your creditors whereby you will pay them back an amount that you can comfortably afford without any more interest or charges. Because it is a legal arrangement, they cannot refuse to comply once it has been accepted by the majority, and you are protected from any further collection action. But this also means that you have a responsibility, a legal responsibility, to honour your commitment and pay the agreed amount into it.

Your Debt Agreement Administrator is also bound by the legal aspects of your arrangement. If you default on your Debt Agreement payments, you have exactly three months in which to make up the arrears. If, after three months and one day, your account is still in arrears, your Administrator must then send out a statutory default notice to your creditors advising them of this. You then have another three months, after which time another letter is sent to your creditors, and so on. Your creditors can use this to then have your Agreement terminated. Generally speaking, they will ask your Administrator for a Status Update report after receiving three default letters, and this is usually a sign that they are considering terminating your Agreement.

If your Debt Agreement is terminated, your debts will be reinstated and you will no longer have protection from your creditors under the Act. Interest and charges will also be reinstated as if the agreement never happened. And whereas after you complete your Agreement your credit file is updated to show this, if it is terminated, its status remains as “unfinalised” until the default is cleared from your name after 7 years.

If your circumstances have drastically changed since entering into the agreement and you can no longer afford the set payments, it is sometimes possible to do a variation. This can only be done with good reason, though, and it must be accepted by your creditors.

It is vitally important, then, to ensure that your Agreement is affordable before you commit to it. An ethical Debt Agreement Administrator will do a full financial assessment for you before suggesting a repayment plan, and will only commit you to something that you will be able to maintain, not just something that may look good to your creditors, but will eventually fall over. Here at the Debt Agreement Advice Centre we have years of experience in assessing and budgeting, and we will only suggest that you go ahead if we feel confident that your Agreement has the best chance of being completed successfully. Call us today on 1800 653 485 and ask us about a financial assessment that can help you determine your repayment capabilities.